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Should Husband Assign Music Royalties to Wife?

Husband is higher rate taxpayer. Wife not a taxpayer. What are tax, legal and inheritance aspects?

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Must admit to being quite ignorant in this area for both the tax and legal aspects.

Retired musician husband receives over £4,000 a year from music royalties and is a higher rate taxpayer on his pension income.

Wife only has small state pension and so has around spare £7,000 personal tax allowance going forward.

Would it be standard advice for husband to assign the royalties rights to the wife. Is this run of the mill work for a solicitor or does it require specialist legal advice.

Are there any tax points created at the point of gifting the rights to the wife. Apart from the different income tax rates, what are the differences in the income tax treatment of the husband retaining the royalties as original owner versus the royalties being paid to the wife (the assignee).

And how long do these music royalties last. When do they expire. Can they be inherited by will. Can the assignee (the wife) will them to her adult children on her death.

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By cathygrimmer
13th Sep 2019 11:18

An assignment of royalties can create a market value amount charged to income tax not CGT so you need to get proper advice before recommending this course of action. I imagine the final questions can probably be answered by searching the Internet or, if your client is happy to pay, by consulting a lawyer who deals with that area.

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By The Dullard
13th Sep 2019 11:40

I agree with Cathy. Take paid for advice before rocking this particular boat. Without a gift to a company, and subject to the application of anti-avoidance provisions, I think that the Hammond Innes case established that market value would not apply. There is anti-avoidance legislation that could catch it though, which would have this effect (notably the sales of occupation income and transfers of income streams provisions).

Even if you made a transfer that didn't create a tax charge, a royalty stream is, arguably, a right wholly to income, such that the settlements legislation would apply, without operation of the spousal exemption, to continue to tax the income on the husband.

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